On Friday, I paid my Q4 quarterly tax estimate.
And about a week ago, I asked my accountant if she could start preparing my 2021 tax return.
I mean, do I know how to party or what?!
I actually love tax time. I always loved tax time as an employee, because there was a sweet, sweet refund check coming my way.
But then for my first few years as a business owner...I hated tax time. Suddenly instead of a refund, I kept discovering that I owed money to the government.
How is that supporting small business?!
Well it turns out, I was getting a tax refund as an employee because my employer was setting aside more of my wages than necessary. So when I filed my return, it was clear that I overpaid on taxes.
As an entrepreneur without a system in place, I was setting aside too little of my income. So when I filed my return, it was clear that I underpaid on taxes.
That was a few years ago.
But now, I have a confession: I love tax time again. Because all throughout the year, I am once again intentionally over-saving, and once I file my return, I distribute 50% of the surplus to my business's Profit account and 50% as an owner's distribution.
That's all thanks to putting in place Profit First for my business. It's a good book, a great system, and I followed it pretty closely using this video and calculator from Matt Giovanisci.
But even beyond Profit First, I'm now obsessed with my Quickbooks account (shoutout to Kristine and the Avant TaxWorks team)!
What I love about it is that l can run monthly or annual reports on my P&L and see exactly where my revenue is coming from, exactly where my costs are going, and all in a quick snapshot.
I've organized my books to categorize my revenue into 7 buckets:
- Digital Products
And each of those categories has several subcategories within it, so I can track performance of products, services, and even affiliate partners.
It's so great.
Last year working full-time at SPI, I stopped offering services. So Services dropped from 70% to just 2% of part of my overall income.
Meanwhile, the other 6 categories combined for a 195% increase – leading to an overall 50% revenue increase last year (while removing Services)! 🤯 😭
I'm not trying to brag – at least not about the numbers.
But I am bragging about the system. And I'm bragging about it because I really encourage you to implement something similar.
By hiring help and taking my bookkeeping seriously, I'm able to get to those numbers quickly. I'm able to make decisions quickly.
Oh, this affiliate is becoming a bigger percentage of revenue....I should reach out and create a collaboration!
Hmm...why was this affiliate so light last month? Oh, they didn't actual pay me out yet. I should chase that down.
Even better, I was able to look month-by-month at my non-Services revenues and feel confident that I could leave my job to be a full-time creator.
But what I really want to emphasize is this: these 7 buckets contain 24 different income sources. Those streams of income have been developed over time, and no single one of them is enough to support me full-time.
But all of those revenue streams run together to create a revenue ocean. And that ocean is enough to support me full time!
It's also super resilient. While a handful of those streams are a majority driver of my revenue, there are always up and down months for each of them. I don't need to worry about any one of them having such a down month that it wrecks my business...
Not to mention, if I need to turn up the dial on Services again, I can do so.
Even if you're not ready to overhaul your entire bookkeeping system, I'd really encourage you to map out your own Buckets and individual Streams of revenue. Day-by-day, week-by-week, month-by-month, you can be developing new streams that add to your revenue ocean.
They will start small. Seven of those 24 streams earned <$100 for me last year. That's OK, because a lot of these things compound.
And it's really encouraging to be able to WATCH that compounding, with data, each and every month.
PLUS, by taking bookkeeping seriously, you can quickly see from your expenses where your money is going and where to cut in a pinch.
That's it. Don't sleep on your financial system.
If you don't have an accounting software in place, I recommend Quickbooks. I'm on the Simple Start Plan, and it's plenty of firepower for me.
And if you haven't considered Profit First, this is a great time to do it. It's a LOT easier to do your finances for an hour or so on a monthly basis as opposed to trying to do it ALL at the end of the year.
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